The General Manager of Fair Work Australia gave evidence to a Senate Committee hearing on 15 February 2012 that an independent review of the HSU investigation was happening, the deal with KPMG was presented as a done deal.  The Hansard record is here and it includes these words;

I have decided to undertake an independent review of the conduct of the investigations. The review will be undertaken by KPMG and I will make the outcome of the review public. Before commencing the review, KPMG will undertake a detailed scoping exercise, which is expected to take approximately one week. That work will commence shortly. The substantive review will commence after the conclusion of the national office investigation so that the review can encompass both investigations

The services of KPMG had not been engaged by any sort of agreement when Ms O'Neill made the public anncement.   The Commonwealth was placed in a position of disadvantage by committing to such a public and important contract without completing the work to get there.

She announced KPMG's appointment on 15 February 2012.   On 6 March this briefing paper was prepared to help Ms O'Neill understand her responsibilities.

The proposition that only KPMG could complete the review was based on:

• urgency - this from the people who brought you the investigation into Craig Thomson
• KPMG's unique specialisation
• sensitivity of the subject matter
• value for money

All of those are specious and risible.  Any of the large firms would have loved a shot at the work.

The supposed scoping work is code for letting KPMG get paid while putting a quote together.

This memo states the expected cost will be around $100K - it ended up more than $500K.

How could anyone associated with this sign their name to a recommendation KPMG provided best value for money without a market test.

The memo refers to FWA practical guide  No 5 relating to engaging external service providers.

It requires a business proposal presented to the Executive and considered by a Procurement Committee which is to establish a tender process. (Publishing on the Australian Tender system).

The requirements of the Financial Management and Accounting regulations is simply that the General Manager after reasonable enquiries determines that the proposal is a proper use of funds.

It was recommended that KPMG be engaged if BON was satisfied as described in the regulations. The Procurement committee process was to be waived.

The contract for the scoping assignment was signed on March 20, 2012.  Cost $38,500,

The method eventually used to access KPMG services was via a deed between the Treasury and various providers enabling a selection to be made from a panel under terms which the Treasury had already determined met the Financial Management Regulations.

This was the idea of FWA and relieved BON from the need to make the determination referred to. FWA signed the necessary MOU with Treasury on April 30,2012,

KPMG seemed to have dramas with this approach - as these emails of the same here and here show.

On 4 May this email from KPMG sets out just how far apart the parties were.

Clause 54 in this version was added providing that the report could not be distributed without the consent of KPMG.

The addition of that clause giving KPMG the right to veto distribution of the report appears to have been added at FWA's request.    Handy to hand a right like that to the supplier you're paying with OPM.

The final agreement was executed on 10 May 2012, almost 3 months after Ms O'Neill made her speech anouncing KPMG's appointment in February and her advice that it was so urgent to give the deal to them it couldn't possibly go to market.

I have had a well-credentialled professional whose career was built on presenting and arguing court cases involving audit and detailed financial/contractual analyses look at this matter.

He makes the following observations about the $500K contract to KPMG.

At the time BON made the statement to the senate committee (sworn evidence status) the following facts are indisputable.

1.No contract existed with KPMG. This includes the scoping phase.

2.BON had no idea of the projected costs and only a vague idea of scope and therefore was in no position to make any judgement as to whether  engaging KPMG was a proper use of funds.

3.The eventual method by which the services were secured was not in contemplation at the time of her sworn evidence that KPMG was doing the review.

4.  Many areas of potential disagreement as to the terms of the eventual contract existed as demonstrated by the subsequent course of negotiation.

5. It was therefore not possible for her to state that the review “will be undertaken by KPMG”.

ENDS

Contempt of the Senate and remedies for contempt

When the actions of a witness or another person influencing a witness have the effect of obstructing the inquiries of a Senate committee (or future inquiries), those actions may be treated as contempts. Examples of such offences include:

• Refusing without reasonable excuse to answer a question;
• Giving false or misleading evidence;
• Failing to attend or to produce documents when required to do so;
• Intimidation of a witness;
• Adverse treatment of a witness;
• Wilfully disturbing a committee while it is meeting.

The Senate refers allegations of contempt to its Committee of Privileges for consideration and report. This committee has developed a considerable body of case law concerning parliamentary privilege, especially in respect of the rights and obligations of witnesses, interference with witnesses and the giving of misleading evidence.

The committee has, for example, inquired into a case where the chairman and senior members of a statutory body attempted to place restrictions on another member of the body from giving evidence. Although no contempt was found to have been committed, the committee was highly critical of the actions of the statutory body.

In another case, the Committee of Privileges investigated an allegation that a witness received adverse treatment from his superior officers as a result of his appearance at a joint committee hearing. Senior officers of a statutory body imposed a penalty on the junior officer, who had given evidence in a private capacity. The Committee of Privileges found that a contempt had been committed and was strongly critical of the officers and the organisation.

The Parliamentary Privileges Act 1987 provides that a House of Parliament may impose terms of imprisonment or substantial fines for individuals and corporations as a penalty for contempt. To date the Senate has not had occasion to use either of these penalties, preferring an educative and preventative approach. The Senate has accepted apologies and remedial action, and has encouraged government officials in particular to attend training courses on the rights and obligations of witnesses before parliamentary committees.

Every touch leaves its trace.   Why the haste to get KPMG announced and in place?   Much more coming.